Modern CFO Role and Responsibilities on the Board of Directors | BoardBookit

Modern CFO Role and Responsibilities on the Board of Directors

The role of the chief financial officer is changing with the onset of the modern board of directors. Although the CFO role was once only responsible for delivering high-quality information to the board regarding the financial performance of the company, there is much more to this role in today’s boardroom. “With market forces intensifying, technology creating broad-scale digital disruption, and systemic threats looming in the form of cyber and geopolitical shifts, even the best-positioned board directors can benefit from a strong relationship with the head of finance,” says McKinsey & Company. The board relationship with the CFO role is changing in the face of modern forces. The need for a clear transparent approach is necessary for the modern CFO to be successful in their key responsibilities and relationship with the CEO and board of directors.

The CFO Role and Critical Responsibilities

The main role of the modern CFO is much different from years past. A role which was once comprised of managing the funds of an organization now takes on a very different approach to managing financials. The CFO role now encompasses the duty to ensure long-term success for their organization by having effective oversight of not only financials, but strategy, performance, and risk. According to the Chartered Institute of Management Accountants, the modern CFO’s duties are comprised of 4 key tasks:

  • Financial security for the organization

  • Ensure business practices are compliant and operating efficiently

  • Advise the board on strategy as the business grows and changes

  • Build capability in finance and in the organization to drive the organization’s goals

With the extensive duties the modern CFO is tasked with executing, the question arises whether to allow the CFO to sit on the board itself.

Should the CFO Role Include a Board Seat?

The key reason why a CFO would sit on a board of directors is directly related to their role as the primary executive responsible for the organization’s financial statements. When the board approves financial statements presented by the CFO role, they become liable for those decisions. Also, including the CFO on the board creates stronger financial oversight and transparency. The CFO role should be a major player in business strategy and help make decisions especially in regards to mergers and acquisitions.

However, there are few CFOs who actually sit on boards mainly due to independence factors. Because the majority of CEOs already sit on the board and act as the main representative for other c-suite executives, placing another executive on the board can dilute independence. The audit committee may also find it hard to function with a CFO who maintains a seat on the board because they are also tasked with the evaluation and oversight of the CFO role.

Building a Strong Relationship Between the CEO and CFO Role

In order to build a strong relationship with the board, the individual who fills the CFO role must first solidify their relationship with the CEO. “To remain competitive in the changing business landscape, these two leaders must forge a relationship based on trust, collaboration, and a shared view on how to move their company forward,” says The CFO Selection. “Together they define the commercial, strategic, operational, and financial blueprints.” With the proper relationship, any organization will maximize its successes and business opportunities.

CFOs and CEOs can take vast steps to improve their relationship with one another. However, a few elements should be understood for a strong foundation based on leadership and respect:

  • Both parties should be transparent, possess mutual trust and respect, share a vision, and present a unified front to the board

  • The CEO should always present an organization’s achievements to the board, while the CFO is tasked with presenting a realistic view of financials, direction, and risk

  • The CFO should also offer important reports on value creation, cost savings, and risk mitigation

  • The CFO must deliver business results, in conjunction with financial organization and reporting the results of investments

When the CEO and CFO role work collaboratively together, organizations will see the change that they expect and the success that they projected.

Building a Strong Relationship with the Board

Whether the person selected for the CFO role holds a seat at the boardroom table or reports under the CEO they have the ultimate responsibility of helping the board understand the organization’s financial strategy and providing comprehensive forecasts for the business.

One of the best ways for CFOs to foster a strong relationship with the board is to create value and define it. The CFO role should always strive to present an objective view of an organization’s finances, performance, and how it compares to market trends along with previous quarters. The CFO’s objective view should also clarify what the board should expect for the organization’s future and allocation of resources based on potential growth. By providing a transparent and clear approach to reporting, CFOs can effectively help the board understand potential weak spots or advantages.

Collaboration and engagement are also important for a strong CFO and board relationship. The more the individual who holds the CFO role engages with the board, they have a better understanding of their concerns and questions. Therefore, if CFOs do not hold a seat on the board, they should at least have time to present at each board meeting.

Through a team effort with the CEO and the board, the CFO relationship can help organizations grow and prosper. The modern CFO role has foundational elements in board and executive relationships as well as focusing on transparency, financial oversight, and business growth.

Recent Tweets

Ready to get started?
Schedule a live demo and discover the BoardBookit Difference.

Schedule Demo

Interested in Learning More?

Read the latest board governance resources from our blog.